Penney Posts First Profit in a Year; Home Depot, Limited Also Gain
J.C. Penney Co. posted its first earnings increase in five quarters, and Home Depot Inc., Limited Inc. and other retailers continued healthy profit growth in their fiscal second quarters amid an expanding economy.
Meanwhile, Saks Inc. said its profit from operations more than doubled to meet expectations for the quarter, but it warned that earnings for the year will miss estimates because sales aren’t meeting expectations. The operator of Saks Fifth Avenue and Mercantile stores made the announcement just after the market closed. The stock fell $4.69 to $19 in third-market trading.
Penney, the nation’s second-largest department store operator, said its profit from operations rose 15% to $112 million, or 40 cents a share, beating expectations of 34 cents, driven by an improved credit business and higher profit margins at its department stores, where shoppers were attracted to private-label brands. Sales rose 8.1% to $7.31 billion.
Sales at stores open at least a year rose 1% at Penney’s department stores and 11% at its Eckerd drugstores. The results exclude one-time charges in both periods related to the acquisition and upgrading of Eckerd.
Limited, the largest apparel chain, said profit from operations climbed 90% to $60.4 million, or 26 cents a share, as its Express, Lerner New York, Lane Bryant and Intimate Brands units all helped it meet Wall Street’s expectations. Sales increased 10% to $2.27 billion, and sales at stores open at least a year also grew 10%. The results exclude one-time items in both periods.
Limited had raised its profit outlook to 26 cents two weeks ago because of higher-than-expected sales at its chains.
Analysts said clothing sales rose at both Penney and Limited after the companies improved store displays, responded quicker to new styles and began stocking more up-to-date styles.
Home Depot, the biggest home-improvement retailer, said its net income jumped 45% to $679 million, or 44 cents a share, as revenue climbed 28% to $10.43 billion.
Home Depot had said last week it expected to earn 44 cents, beating analysts’ forecasts by 5 cents. Sales at stores open at least a year surged 11%. The retailer also benefited from demand for items that generate higher profits, such as flooring and kitchen fixtures.
At a Glance
Other retailer earnings, excluding one-time gains and charges unless noted:
* AnnTaylor Stores Corp.’s profit from operations climbed 90% in its fiscal second quarter to $13.4 million, or 42 cents a share, a penny higher than estimates. The women’s career-apparel retailer said revenue increased 19% to $266 million, and sales at stores open at least a year rose 8.4%.
* Dayton Hudson Corp. said profit from operations grew 33% to $228 million, or 49 cents a share, 3 cents higher than estimates, driven by “exceptional strength” at its Target discount stores. Dayton, whose other chains include Mervyns, said total sales rose 9.9% to $7.75 billion. Sales at Target, which account for nearly 75% of total revenue, surged nearly 13%. Target has lured shoppers with innovative merchandising, such as a line of cookware and home products designed by Michael Graves, and with advertising in upscale publications such as Architectural Digest, analysts said.
* Saks said profit from operations rose to $26.6 million, or 18 cents a share, from $12.1 million, or 8 cents, a year ago, as revenue grew 11% to $1.43 billion and same-store sales rose 4%. But the retailer lowered expectations for annual earnings because its Saks Fifth Avenue department stores aren’t stocked with enough high-profit goods, and sales at its Mercantile stores and other regional chains are falling short of forecasts.
Saks lowered its expectations to earnings of $1.80 a share from its original estimate of $2.10 to $2.25 a share. The retailer had been expected to earn $2.16, the average estimate of analysts polled by First Call Corp.
* TJX Cos., operator of the Marshalls and T.J. Maxx off-price chains, said its net income increased 44% to $114.7 million, or 36 cents a share, a penny better than forecasts, with help from lower inventory costs. Revenue grew 13% to $2.1 billion. Sales at stores open at least a year rose 7%.
* Tiffany & Co.’s earnings jumped 70% in the fiscal second quarter to $23 million, or 31 cents a share, well beyond the 24 cents analysts estimated, on strong sales of its luxury goods worldwide. Revenue rose 24% to $307.1 million, with a boost from sales growth in Asia and Europe. Sales in U.S. stores open at least a year rose 12%. In Japan, same-store sales rose 16%.
